The UK private sector will have to play a “key role” in investing in the country’s energy transition as Brexit uncertainty continues, according to a new report from Ashurst law firm.
Powering Change: Energy in Transition found that 64% of respondents in the UK are currently investing in the energy transition in the country, though the UK itself is seen to be “less attractive” than other global markets by businesses in Europe’s other G20 nations.
The report found 12% of respondents in Germany said they were currently investing in the energy transition in the UK, with French and Italian figures also much lower than UK investors’ commitments.
In addition, 10% of European respondents that do not currently invest in the UK are considering doing so over the next five years.
The report surveyed more than 2000 senior business leaders across G20 countries on the changing global energy market, as countries “seek to meet rising energy demand and a drive towards decarbonisation”.
UK respondents are also more sceptical about the importance of the energy transition to their business when compared to others in many G20 countries, the report highlighted.
Across the G20, 78% of respondents saw investing in the energy transition as “essential to strategic growth”, with higher-than-average scores in European countries France (85%), Germany (81%) and Italy (88%). Businesses in the UK ranked at 73%.
UK investors said that initial capital (34%), transaction costs (33%), lack of commercial incentives (32%) and technical risk (32%) were the biggest barriers to investing in the energy transition.
“The UK Government will therefore need to look to address these barriers as it works towards achieving net zero carbon emissions by 2050,” stated the study.
Ashurst power and utilities global co-head Antony Skinner said: “The effects of climate change can no longer be ignored. Addressing its impacts has become a priority for businesses, governments and individuals alike.
“As the energy transition takes place, with increasing emphasis on cleaner and renewable technology, energy supply is under more scrutiny than ever before.
“Some parties have a first-mover advantage while others are taking their first, tentative steps in their contribution to a carbon neutral economy.
“With the onset of COVID-19 and the sharp reduction in oil prices, this is clearly a volatile and uncertain period for all markets, especially energy. However the fundamentals of the market and prospects for the clean energy transition will likely remain largely unchanged in the longer term.
“This report highlights the global opportunities as the transition accelerates, and investors and society place growing pressure on corporates and governments to take more assertive action.”
Policy changes since the research was conducted could help to reduce some of the barriers identified by executives and further boost inward investment.
In March 2020, the UK Government proposed amendments to the next Contracts for Difference allocation round, which is scheduled for 2021, which may see onshore wind, solar PV and energy from waste (with CHP) projects once again be eligible to take part, said Ashurst.
The UK Government is also planning £500m of investment in an EV supercharging network in the next five years.
The UK is expected to see continued growth in solar investment, with 54% of respondents currently investing in, and 24% who are planning to invest in solar over the next five years.
Ashurst infrastructure and energy M&A co-head Michael Burns added: “The UK is an attractive market for investment in the energy transition space.
“Net zero carbon commitments combined with a highly developed industrial base provide a strong platform for those looking to develop both new and existing businesses.
“We’re also in a period of significant technological disruption. Disruption creates opportunity. So when you combine climate change-related policy with technological advances, you have an exciting mix that is capable of driving future success in what is, at the moment, clearly a time of market uncertainty.”